Who is wealthy and who is fabulously wealthy: super debate

Updated
April 02, 2013 09:55:00

The Coalition is trying to capitalise on internal Labor Party divisions over superannuation. Government backbencher Simon Crean has repeatedly raised concerns about whether superannuation tax concessions might be targeted in the May budget. Frontbencher Craig Emerson says the rules will not change for average income earners but the system could be made more equitable by targeting the so-called 'fabulously wealthy'. The lack of detail is giving the Opposition oxygen to speculate about how far the changes might go.

TONY EASTLEY: The Coalition is trying to capitalise on internal Labor Party divisions over superannuation.

Government backbencher Simon Crean has repeatedly raised concerns about whether superannuation tax concessions might be targeted in the May budget.

Frontbencher Craig Emerson says the rules will not change for average income earners but the system could be made more equitable by targeting the so-called "fabulously wealthy".

The lack of detail is giving the Opposition oxygen to speculate about how far the changes might go.

Craig Emerson is the Minister for Tertiary Education, Skills, Science and Research, Trade and Competitiveness, and the Minister assisting the Prime Minister with Asian Century Policy.

He joins us in our Canberra studio and he is speaking with chief political correspondent Sabra Lane.

SABRA LANE: Dr Emerson, good morning and welcome to AM.

CRAIG EMERSON: Thanks very much.

SABRA LANE: You tried to narrow the debate on the weekend by saying that this would only affect the "fabulously wealthy". What do you mean by that?

CRAIG EMERSON: What I said in fact is that it is worthwhile having a debate about the fact that fabulously wealthy people are able to get an advantage of paying a 15 per cent tax whereas everyday Australians on ordinary wages, pay 30 per cent or more.

I didn't set a dividing line. I'm simply referring to the fact that there are fabulously wealthy people in Australia.

Now if we want to have a debate with the Liberal Party as to whether there are or are not fabulously wealthy people, I'm happy to have that.

This is what I say about fabulously wealthy people, god bless their little cotton socks. That's great, no problem.

But we should be able to have a discussion about the idea that at the very high end, people are able to take advantage of highly concessionary superannuation tax treatment where if we look at the lower end, we have lifted the superannuation contributions tax off the shoulders of low income earners, 3.6 million Australians earning up to $37,000 and the Coalition wants to put it back on.

That's the sort of debate that we're having.

SABRA LANE: But the current debate too is about what savings the Government is looking for to help pay for some big budget items like the education reform, the National Disability Insurance Scheme. The fabulously wealthy, possibly, are you talking or looking at people who are earning $300,000 or more?

CRAIG EMERSON: I'm not nominating thresholds but this is a philosophic debate and we're talking actually about fiscal sustainability. By that I mean the long-term sustainability of a budget where the tax concessions at the very top end are proving expensive and will be increasingly expensive over time.

We question the sustainability of that. Mr Abbott says that's fine, that's not a problem.

What's not sustainable according to Mr Abbott is relieving the tax burden on low income earners. He says that that's not sustainable, they'll whack them with a 15 per cent tax. They would abolish the SchoolKids Bonus and they'd bring the tax-free threshold back from $18,200 to $6,000 because that's where Mr Abbott is concentrating his scalpel, his axe, his knife and what we're saying is that at the very high end, that's where we need to achieve the fiscal sustainability - not the average worker.

SABRA LANE: But it's a debate also playing out within Labor. You've had Joel Fitzgibbons say that people in his electorate who earn $130,000, $140,000 shouldn't be considered wealthy or rich.

CRAIG EMERSON: Well again, I'm here to debate with you and through you, your listeners, the philosophy of whether we achieve fiscal sustainability over the long term which is a request that's been made of this Government, understandably, for a long time.

We say that's a fair enough request. We've already cracked down on a number of benefits that go at the higher end to make the budget more sustainable. We're happy to have that debate.

SABRA LANE: Okay, in context of that debate, you've said fabulously wealthy. What's just wealthy, then?

CRAIG EMERSON: No, what I said... and look I'll read it, okay? I'll read it so that we know exactly what I said.

"People who are fabulously wealthy gaining an advantage by putting their money into super and being taxed at 15 per cent where the everyday Australian may face a tax rate of 30 per cent, that enlivens a debate". That's what I said.

So let's discuss what I actually said and the point of all that is to say that there is a philosophical gulf between the Labor Party and the Coalition, where the Labor Party are saying we need to achieve fiscal sustainability over a long period of time to build on the savings we've already made and we're looking at the very high end.

The Coalition said 'Don't you touch that, don't you touch that but what we'll do is wield the axe on the SchoolKids Bonus, the tax-free threshold and superannuation for low income earners'.

SABRA LANE: Dr Emerson, you keep framing this in terms of the Opposition but this is also playing out within your party and the one who blew the whistle on all of this was Simon Crean.

Simon Crean said it makes no sense for the Government to be taxing the savings of ordinary Australians to protect your own surplus, the Government's own surplus.

CRAIG EMERSON: Simon Crean has said, quite rightly, that superannuation is a creation of the Labor Party and the truth is we brought in superannuation for working people. There was already a superannuation scheme for higher income workers. That existed before we brought it in - voted against by the Coalition.

Then we sought to increase it from 9 to 12 per cent. We have, but voted against by the Coalition and Joe Hockey had the temerity...

SABRA LANE: Again, you're going back to the Opposition here and-

CRAIG EMERSON: Joe Hockey had the temerit-

SABRA LANE: ..these are comments that are coming from your own side.

CRAIG EMERSON: We had to get this through the Parliament. We had to get our superannuation changes through the Parliament.

Every time we have sought to get superannuation benefits for the working men and women of Australia through the Federal Parliament, going back to the early 1990s, it has been fiercely opposed by the Coalition. I think that's a legitimate point to make.

And now they're saying, 'Oh, you know, you shouldn't touch superannuation'. They want to take an axe to superannuation for low income earners.

SABRA LANE: Simon Crean is the one who is making those warnings. Last year...

CRAIG EMERSON: And what I'm saying there, Sabra, is Simon Crean absolutely and fundamentally agrees with me that the history of the superannuation scheme for the working men and women of Australia is Labor implementing it with the Coalition always opposing it.

Who said that superannuation is a con job? Tony Abbott.

SABRA LANE: Last year in the budget the Government tried to already increase the tax on contributions from 15 to 30 per cent for those earning more than $300,000. That is yet to go through Parliament. Are you looking to increase that or lower the threshold?

CRAIG EMERSON: I'm not going into the details of it because the details will be revealed by the budget, and I accept-

SABRA LANE: Okay, are you prepared for a six week campaign on this now, because essentially-

CRAIG EMERSON: I accept- I accept your...

SABRA LANE: ..you've created a vacuum now and people are going to feel it?

CRAIG EMERSON: Okay, I'll have a go now. I accept that it is your job to try to get the details of this as soon as possible and ahead of every other media outlet but just like other budget items, we don't simply at the request of people say 'This is what's going to be in the budget or before the budget'.

We are developing proposals that are fair and equitable because we believe that the few at the very top end are enjoying tax concessions that can't be afforded by the budget and the contrast, of course, is with the Coalition who says at the low end, that's where people should be paying more. We don't agree with that.

SABRA LANE: You're off to China later this week with the Prime Minister. Are the tensions over North Korea going to overshadow the entire trip?

CRAIG EMERSON: They won't overshadow, no, but of course this is an item that the Government will raise. We welcome the fact that China and Russia have called for restraint. We think that's a good thing.

There isn't actually increased signs of military activity from North Korea but certainly their language is very militarist. That's unfortunate.

We are looking at further sanctions against North Korea. We do consider North Korea to be a danger but I'm just emphasising the fact that beyond the rhetoric, at this stage, there are no signs of increased military activity by North Korea. And there's an industrial zone on the border of North and South Korea, one litmus test is whether the North Korean workers who get some money out of working in that, continue to do so, whether the zone's open and it is.